Tag Archives: centurylink

CenturyLink can close its deal to buy Level 3 Communication, and will probably do so tomorrow. The Federal Communications Commission gave the final green light to the deal on Sunday, without imposing any significant conditions. The FCC’s decision amounts to a manifesto that lays out how the republican majority will sharply restrict its review of future mergers and acquisitions.

In a statement, FCC chair Ajit Pai said such conditions are a thing of the past…

This is in line with past pronouncements by the Commission that we will use conditions “only to remedy harms that arise from the transaction (i.e., transaction-specific harms)” and that are “related to the Commission’s responsibilities under the Communications Act and related statutes,” and we “will not impose conditions to remedy pre-existing harms or harms that are unrelated to the transaction.”

For the CenturyLink-Level 3 deal, the FCC found those transaction-specific harms to be virtually non-existent. The sole condition it attached to its approval was a five year price freeze on business services in 10 buildings scattered across the U.S. (but none in California), where Level 3 and CenturyLink both serve customers. That’s out of 4,600 buildings where the two companies currently compete.

The final version of the California Public Utilities Commission’s decision allowing CenturyLink to buy Level 3 Communications was just released. There are no apparent changes from the draft on the table when the CPUC unanimously approved it last Thursday – minor formatting aside, that could not happen under CPUC rules. Even an obvious typo on page 3 wasn’t corrected.

The settlement dances around the central problem posed by the merger: the increasing concentration of California’s already uncompetitive market for dark fiber and other wholesale services. CenturyLink will have to work with the groups – including the California Emerging Technology Fund, which was otherwise shut out of the decision – to identify a project, or maybe more than one, that’ll expand middle mile fiber infrastructure in under and/or unserved areas. But assuming this new infrastructure is eventually built, there’s no requirements regarding how, or even if, it’ll be offered to potential customers.

There’s a capital investment target, but it’s squishy. CenturyLink committed to $323 million in capital spending in California over the next three years, but only “aspires” to invest in network expansion and upgrades or meeting customer demand. That’s a loophole big enough to march a platoon of accountants through.

There are weak requirements for CenturyLink to honor existing service contracts in California for two years, and to give 90 days notice if – when – it exits the dark fiber business.

CenturyLink’s purchase of Level 3 Communications appears ready to sail through to approval by the California Public Utilities Commission later this morning. The proposed decision, drafted by CPUC administrative law judge Regina DeAngelis, was still on the consent agenda as of last night. That means no commissioner wants to talk about it or hold it for consideration at a later meeting.

That’s not a guarantee of approval today – commissioners can put a hold on the decision or pull it off the consent agenda for discussion during the meeting. But odds are it’ll be one of a dozen or so items that’ll be disposed of in a single batch vote, without comment.

DeAngelis posted a revised version of her draft decision yesterday afternoon. It only contains relatively minor edits, and a new warning to CenturyLink that approval “is granted subject to…continued cooperation with Commission Staff Data Requests relating to their facilities”.

CenturyLink and Level 3 are two of maybe four major fiber network operators between major Californian cities, and Level 3 is the only one with dark fiber leasing built into its business model. Opportunities to lease dark fiber from CenturyLink, let alone AT&T and Verizon, are vanishingly rare.

Assuming CPUC approval comes today, the only remaining hurdle is a final blessing from the Federal Communications Commission. That seems likely to come soon. The FCC notified CenturyLink that it was restarting its informal shot clock, with the countdown nominally ending on Monday.

CenturyLink’s purchase of Level 3 Communications is on track to be approved by the California Public Utilities Commission on Thursday. It’s always possible that a decision could be bumped to a later meeting, but there’s no indication at this point that there will be any delays.

A settlement CenturyLink reached with anti-trust lawyers at the federal justice department last week takes the edge off the damage the deal will do to California’s broadband market, although it doesn’t eliminate it. Level 3 is the largest independent source – often the only source – of dark fiber, which competitive broadband providers need to compete with the likes of AT&T and Comcast.

That agreement has CenturyLink giving up dark fiber strands on 30 key routes, including five in California. Unlike the CPUC’s review, the federal investigation into the effects of the merger identified the real danger it poses…

Dark fiber is a crucial input for large, sophisticated customers that need to move substantial amounts of data between specific cities. These customers have specialized data transport needs, including capacity, scalability, flexibility, and security, that can be fulfilled only by Intercity Dark Fiber. CenturyLink and Level 3 compete to sell Intercity Dark Fiber to these customers, and this competition has led to lower prices for and increased availability of Intercity Dark Fiber. The consolidation of these two competitors would likely substantially lessen competition for the sale of Intercity Dark Fiber for thirty city pairs in the United States in violation of [anti-trust law].

Allowing two of the major – sometimes only – sources of inter-city dark fiber to merge would be anti-competitive and illegal, according to the federal justice department. So in order to gain approval to buy Level 3 Communications, CenturyLink agreed to a settlement that requires it to give up control of 24 strands of dark fiber between 30 pairs of cities, including five key California routes.

The settlement also requires CenturyLink to divest overlapping metro fiber systems in Albuquerque, Boise and Tucson.

The fiber will be leased for up to 35 years to a single company that “has the intent and capability (including the necessary managerial, operational, technical, and financial capability) of competing effectively in the sale of Dark Fiber [leases] to end users”. The transaction, and compliance with detailed instructions on how it’ll be carried out (links below), will be overseen by an independent trustee.

The lines in (and out of) California to be sold are:

Los Angeles to Las Vegas

Sacramento to Salt Lake City

Sacramento to San Francisco

San Diego to Phoenix

San Francisco to Los Angeles

The routes between San Francisco and LA, and from San Francisco to Sacramento and on to Salt Lake City generally follow railroad right of ways. Just a quick glance at the track confirms that the fiber buried there belongs to AT&T, Verizon, CenturyLink and Level 3. It’s a critical bottleneck for anyone trying to enter the retail broadband market along those corridors.

Taking Level 3 out of the mix would leave it all in the hands of companies with a legacy, Bell-centric telephone business model that maximises profit by restricting wholesale supply and selling what’s left at retail rates. Which pretty much kills any hope of broadband competition at modern service levels.

The best solution would have been to nix the deal, and keep Level 3 as the only heavyweight independent operator in the dark fiber business. The agreement that federal anti-trust lawyers reached with CenturyLink is a reasoned, if less satisfactory, alternative.

The California Public Utilities Commission and the Federal Communications Commission still have to bless the deal. The settlement reached by the federal justice department will go a long way toward greasing the skids at both agencies.

Today is the day that a CenturyLink lawyer described as “almost too awful to contemplate”: October is here and CenturyLink doesn’t have permission yet to buy Level 3 Communications, from either the California Public Utilities Commission or federal regulators that are reviewing the transaction.

It’s not really all that horrible. The 30 September 2017 deadline was a target that the two companies set for wrapping everything up. It’ll cost them more to keep the financing arrangements intact, but the tab isn’t going to hugely different from what it would have been if they had a better grasp of what it takes to get big telecoms mergers okayed and allowed more time from the beginning. Or if they hadn’t wasted almost five months before filing the right paperwork with the CPUC.

It’s possible that the ALJ running the proceeding, Regina DeAngelis, could make changes to the proposed decision ahead of a commission vote, or commissioners are free to offer alternative versions. If that happens, or even if a commissioner just wants more time to think about what’s already on the table, a final vote could be delayed. But so far, that hasn’t happened.

If the usual process is followed, commissioners will make the final decision at their 12 October 2017 meeting, or a later meeting if there’s significant disagreement amongst them. It’s theoretically possible that a vote could be taken at their 28 September 2017 meeting, but only in the sense that it’s theoretically possible for a tornado to blow through a junkyard and produce a fully functional iPhone. And even if it did, Apple’s lawyers would crush it, claiming patent infringement by the tornado. So expect a final decision in October, not September.

This Settlement involves compromises of parties’ preferred outcomes. The fact that multiple parties, with divergent interests, reached a mutually acceptable compromise, however, provides evidence that the Settlement is reasonable in light of the record. Even though CETF does not join in the Settlement, the Settling Parties still include the Joint Consumer Groups representing consumer interests. The Settlement addresses the Joint Consumer Groups’’ concerns by providing discrete benefits to California consumers including,, among other things, improved service quality, funding for facility expansion and certainty for enterprise and wholesale customers with existing contracts.

There’s no mention of Telnyx LLC in the proposed decision. Telnyx jumped into the CPUC’s review of the deal at the last minute, claiming that Level 3 was cutting off wholesale VoIP services to independent service providers. Although ALJ Regina DeAngelis gave Telnyx permission to participate in the proceeding, she threw out their protest, because it wasn’t properly filed. Although Telnyx can continue to participate, it has nothing of substance on the table.

The game isn’t over when the California Public Utilities Commission votes to impose conditions on big mergers. Telecoms companies will immediately challenge decisions, administratively and in court, and try to wriggle out of obligations by any means possible.

Comcast is doing that now in Vermont, where that state’s public utilities commission required it to build out 550 miles of line extensions into rural areas. According to an article by Jon Brodkin in Ars Technica…

The company’s court complaint says that Vermont is exceeding its authority under the federal Cable Act while also violating state law and Comcast’s constitutional rights…

Comcast’s complaint also objected to several other requirements in the permit, including “unreasonable demands” for upgrades to local public, educational, and governmental (PEG) access channels and the building of “institutional networks (“I-Nets”) to local governmental and educational entities upon request and on non-market based terms”…

Comcast often refuses to extend its network to customers outside its existing service area unless the customers pay for Comcast’s construction costs, which can be tens of thousands of dollars.

When faced with demands for conditions or concessions, Comcast is particularly stroppy – rather than negotiate, it mounted a smash mouth campaign against opposition to its failed bid to do a massive three-way merger/market swap deal with Charter and Time Warner in 2015.

Other companies, that are all sweetness and light while trying to convince regulators to okay their deals, can also turn nasty once the ink has dried. For example, Frontier Communications was represented by friendly, knowledgable telecoms professionals while it sought, and received, CPUC permission to buy Verizon’s wireline telephone systems in California. But within a few months of the sale closing, those key frontline people disappeared from public view, either fired as the company downsized or relegated to back rooms. They were replaced by litigious lobbyists who engage in scorched earth opposition to any project, program or requirement that doesn’t suit their business model.

Likewise, CenturyLink is spinning a handful of feeble promises into epic concessions as it seeks CPUC permission to buy Level 3 Communications. But the actual agreement is stuffed with weasel words and CenturyLink has consistently played hardball with both opponents and the commission. There’s no reason to think it’ll be any less aggressive in pursuing its interests if and when it’s a done deal. That’s a fact of life that the CPUC would do well to consider as it grinds its way through its review.

The already poor chance that CenturyLink would get permission from the California Public Utilities Commission to buy Level 3 Communications before the end of September took another steep nosedive yesterday. A 5:00 p.m. deadline came and went without a draft decision – yes or no – being released by the CPUC administrative law judge (ALJ) and commissioner handling the case.

In the normal course of business, proposed decisions have to go through a 30 day public review and comment process before being voted on by commissioners. To get on the commission’s 28 September 2017 agenda, a draft decision had to be posted by close of business yesterday. That didn’t happen and that means CenturyLink and Level 3 won’t get California’s blessing before their 30 September 2017 target date for closing the deal.

Second, the assigned ALJ, Regina DeAngelis, was very clear at a pre-hearing conference earlier this month that she thinks the 30 day review period is mandatory and rebuffed oral arguments to the contrary. It wasn’t a reach on her part, it was just conventional wisdom, particularly when a Californian proceeding continues to be challenged by officially recognised parties, as this one is.

Finally, the standard for shortening the 30 day review period is not whether it’s a matter of corporate convenience but rather if it’s a matter of public interest and it’s “an unforeseen emergency situation”. It’s hard to see how short circuiting the normal debate over a contested transaction – particularly one as bad for California’s telecoms market as the proposed CenturyLink-Level 3 hookup – is in the public interest, and even harder to believe there’s anything unforeseen happening. It’s common for fraught proceedings to run a year or more at the CPUC and it was CenturyLink’s choice to wait almost five months before formally beginning this one.